Xerox to acquire and convert more multi-brand resellers
$100m M&A warchest earmarked for acquisitions in 2017, both in its native US and internationally
Xerox says it will use a $100m warchest it has set aside for M&A in 2017 to buy up and convert multi-branded resellers, both in the US and internationally.
Fresh from spinning off its business process outsourcing arm on 1 January, Xerox yesterday unveiled results for its final quarter of 2016 ending 31 December, which showed revenue from continuing operations falling 7.2 per year on year cent to $2.7bn.
On a Q4 conference call, CFO Bill Osbourn said that Xerox will have between $1bn and $1.2bn in cash available for capital allocation in 2017, about $100m of which has been earmarked for M&A.
Xerox has a track record of buying up multi-branded resellers and converting them to "mono-branded" resellers selling just Xerox, particularly in the US where it operates its Global Imaging Systems dealer brand, Osbourn explained.
In 2017, Xerox's M&A strategy will likely continue in the same vein, Osbourn said on the call, a transcript of which can be found here, although he opened up the possibility of deals outside Xerox's native US.
"Historically we have had very good returns in [buying multi-branded resellers]," he said. "We have paid a multiple in the range of one times revenue and we look, to the extent that they are the right opportunities in doing those type of acquisitions in 2017 and beyond, not only in the US but internationally."
The $100m is on the low end of the $100m-$400m M&A warchest Xerox set aside for 2016, a year which saw it make various acquisitions, including Dallas-based dealer ASI Business Solutions in October. Xerox has bought UK dealers in the past, including Concept Group and NewFieldIT in 2011.
CEO Jeff Jacobson said Xerox participates in an $85bn market, adding that the NYSE-listed firm's business is 75 per cent post-sale based.
For its Q4, annuity post-sale revenues fell 3.2 per cent in constant currency while equipment sales slumped 10.1 per cent in constant currency.
To stop the rot on the equipment side of its business, Xerox has realigned its go-to-market model and is expanding its channels to pursue what is sees as growth opportunities in the market. It cited document outsourcing - particularly managed print for medium sized firms - A4 multifunction printers, and the cutsheet colour production and emerging production inkjet market as hotspots.
The launch of 29 new A3 and A4 products in the office space in Q2 will also breathe life into the top line, Xerox predicted.
James Kight, CEO of Printerland, which claims to be Xerox's largest hardware and consumables reseller in the UK and Europe, was not concerned at the prospect of Xerox buying more dealers on this side of the pond, saying the strategy "is nothing new".
Despite Xerox's sales slump, Printerland's Xerox sales rose last year, Kight said.
"The acquisitions they've done have tended to add managed services capabilities, and in some respects that benefits us as it gives us more things to sell," he said. "Xerox are trying to get extra margins and services, and not just rely on hardware and consumables, and that doesn't concern me. If there was a conflict of interest with any acquisition we'd be the first to look at it."
Kight added that manufacturers buying services partners is part and parcel of the print market, emphasising that the acquisition of multi-vendor print and IT services provider Annodata by Kyocera in December has so far had no impact on Printerland's relationship with the vendor.